Credit scoring, knowing where you stand

Divorced and desperate for some credit to ease the purse strings since your divorce? What can you do if you have financial problems after divorce and need to borrow some money?

Credit scoring Before you can borrow money to help get your life back into shape any lender they will credit score you. Lenders obtain their information from credit reference agencies who hold details of people’s credit history. Both Experian and Equifax offer a free credit scoring service.

If you are turned down for a loan or other form of credit, the lender does not have to give you a reason but you do have the right to be given the name and address of the credit reference agency used. If you find that any of the information they hold about you is incorrect you can write to them and let them know.

Negative point scoring There are a number of reasons why you may be refused credit but the most common are these:

Not being on the electoral role.

If you have had a number of different addresses in the last three years or have been at your current address for less than six months you are likely to fall foul of the credit scoring system, which means that those in rented accommodation are liable to fail to score well on this particular criterion.

Your previous credit history will account for 35% of your credit score. CCJs (County Court Judgements), missed and late payments will all reduce your score and stay on your credit file for six years. However, their effect lessens over time.

Several jobs in the past three years or periods of unemployment will affect your credit score adversely although changing your job for one that is better paid should not cause a problem.

Positive point scoringYou will be awarded maximum points if you have been with your bank for a long period of time. If you have only just opened an account or have changed from one bank to another this will reduce your rating. Most detrimental is not having a bank or a current account.

Your score will also be higher if you have been at your current address for more than three years. The impact of having lived there for less than three years will be less if you are a homeowner.

Each time that you make an application for credit a search is made and recorded on your file. A large number of applications in a short space of time is not well regarded as it may be construed that you are desperate to obtain credit.

If you have made a number of applications that have been declined then it is advisable no to make any new applications for about six months. This period will also give you time to review your credit file and check that all the information on it is correct.